House Rent Allowance (HRA) is a component of a salaried employee's CTC that can be partially or fully exempt from income tax under Section 10(13A). The HRA exemption is one of the most significant tax-saving avenues for salaried individuals living in rented accommodation. Our HRA calculator computes your eligible exemption instantly.
How Is HRA Exemption Calculated?
The HRA exemption is the minimum of three amounts: (1) Actual HRA received from the employer; (2) Actual rent paid minus 10% of basic salary; (3) 50% of basic salary for metro cities (Mumbai, Delhi, Kolkata, Chennai) or 40% for non-metro cities. The HRA received minus the exemption is added to taxable income.
HRA for Rent Paid to Parents
You can claim HRA exemption even if you pay rent to your parents (not spouse). The arrangement must be genuine — your parents must declare the rent as income in their ITR, and a rent agreement should exist. This is a legal and widely used tax-planning strategy, especially effective if your parents are in a lower tax bracket.
HRA Proof and Documentation
If annual rent exceeds ₹1 lakh (more than ₹8,333/month), you must provide the landlord's PAN to your employer. If the landlord is an NRI, the tenant must deduct 30.9% TDS on the rent before payment. Keep rent receipts and agreements for potential Income Tax Department queries.
Frequently Asked Questions
Can I claim both HRA and home loan interest deduction?
Yes. If you live in a rented house in a different city from your self-occupied property, you can claim both HRA exemption and home loan interest deduction (Section 24b). You can also claim both if your own home is let out while you live in rented accommodation.
What if my employer does not provide HRA?
If your salary structure doesn't include HRA, you can claim rent deduction under Section 80GG — up to ₹60,000 per year (subject to conditions). This applies to self-employed individuals and employees not receiving HRA.
Is HRA available under the New Tax Regime?
No. HRA exemption is not available under the New Tax Regime. This is one of the key reasons why high-rent-paying employees in metros often find the Old Regime more beneficial.
What happens if I don't submit rent receipts to my employer?
Your employer will include the full HRA in your taxable income and deduct TDS accordingly. You can still claim the HRA exemption while filing your ITR by providing rent receipts as part of your tax computation.